January 5, 2015

Federal Circuit to Consider Whether Delay in Filing Suit Can Bar Damages or Injunctive Relief in Patent Cases

The Federal Circuit has granted an en banc rehearing in SCA Hygiene Products v. First Quality Baby Products to revisit whether and to what extent a patent owner’s unreasonable delay in filing an infringement suit can bar recovery of money damages and/or injunctive relief. The en banc rehearing comes in the wake of the Supreme Court’s decision last term in Petrella v. Metro-Goldwyn Mayer, Inc., which held that the equitable doctrine of laches did not bar a copyright owner from recovering damages for acts of infringement that occurred within the statute of limitations for copyright actions. The Federal Circuit will now consider whether to extend the reasoning of Petrella to patent cases, potentially making it easier for plaintiffs who have delayed bringing suit to claim damages but possibly making it harder for such dilatory plaintiffs to obtain injunctive relief. The court has invited amici curiae to participate in the briefing process. Amicus briefs are due beginning in late February.

Current Federal Circuit law holds that under the equitable doctrine of laches, a patent owner’s unreasonable delay in filing suit after it has first learned of infringement can bar a claim for pre-suit damages, but not prospective relief (such as an injunction). Where the patent owner delays more than six years, there is a rebuttable presumption that the laches bar applies. The Federal Circuit will now consider changing or abandoning these rules.

The laches defense is related to, but separate from, the six-year limitation on damages provided by 35 U.S.C. § 286. Section 286 bars the patent owner from recovering any damages from acts of infringement that occurred more than six years before the complaint was filed. For example, if a defendant began selling an infringing product in 2008, a patent owner who filed suit in 2015 would only be able to recover damages for the sales that occurred from 2009 forward. But the earlier sales would not necessarily bar the recovery of damages for sales that occurred within the six-year limitations period.

That is where the laches defense comes into play. In 1992, the Federal Circuit held in A.C. Aukerman Co. v. R.L. Chaides Construction Co. that laches could bar the patent owner’s damages claim in its entirety if the defendant proved that (1) the patentee unreasonably and inexcusably delayed filing suit after learning of the infringement and (2) the delay prejudiced the defendant. Borrowing the time limitation from § 286, the Aukerman court further established a presumption that laches applies where the patent owner waits more than six years to file suit. This means that if the patent owner first learns of infringement in 2008, but waits until 2015 to file suit, there is a rebuttable presumption that all damages claims are barred—even those based on acts of infringement occurring less than six years before suit was filed.

Aukerman held, however, that the laches defense does not apply to prospective relief. Thus, for example, the fact that the plaintiff waited more than six years before filing suit would not preclude the patent owner from seeking injunctive relief to address ongoing or future infringement.

The Supreme Court’s Petrella Decision

Last term, the Supreme Court held in Petrella that laches could not be used to bar a copyright infringement case in its entirety, even if a copyright holder had been aware of the infringement for decades. Prior to Petrella, the Ninth Circuit followed a rule similar to Aukerman in copyright cases, holding that laches applied if “any part of the alleged wrongful conduct occurred outside of the limitations period.” But the Supreme Court rejected this view, holding that such an application conflicted with Congress’s intent in enacting a three-year statute of limitations for copyright infringement actions. The Court noted it did not have “occasion to review” the Federal Circuit’s Aukerman decision. But its reasoning clearly casts doubt on Aukerman’s continued viability.

The SCA Hygiene En Banc Case

The SCA Hygiene case currently before the Federal Circuit will reconsider the doctrine of laches in light of Petrella. The case squarely presents the laches question. The plaintiff (SCA) accused the defendant (First Quality) of infringement on October 31, 2003. It did not file suit until August 2, 2010—roughly six years and nine months later. Both the district court and the Federal Circuit panel applied Aukerman and held that laches barred the damages claim. The Federal Circuit panel noted the Petrella ruling, but concluded that it was still bound by Aukerman, paving the way for en banc review.

The Federal Circuit’s en banc order presents two questions to the parties and amici. The first question is fairly specific: should Aukerman be overruled so that laches cannot bar a claim for money damages based on acts of infringement that take place within the six-year period provided by § 286? The second question is more open-ended: when should laches serve as a complete bar to an infringement claim for money damages or injunctive relief? The answers to these questions could work a significant change in existing patent law, potentially narrowing the availability of laches as a defense to damages claims but possibly making it newly available as a defense to claims for injunctions or other prospective relief.

Here is the full text of the questions presented by the court:

(a) In light of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014) (and considering any relevant differences between copyright and patent law), should this court’s en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992), be overruled so that the defense of laches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitations period established by 35 U.S.C. § 286?

(b) In light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief? See, e.g., Lane & Bodley Co. v. Locke, 150 U.S. 193 (1893).

Deadlines for Submission of Amicus Briefs

Amicus briefs supporting SCA—i.e., arguing for a change in existing Federal Circuit law on laches—or in support of neither party are due on February 20. Amicus briefs in support of First Quality—i.e., arguing in support of existing Federal Circuit law—are due March 23. Oral argument has not yet been scheduled.